In possible good news for a faltering animation industry in India, NASSCOM has forecasted that the industry will grow to USD 1 billion by 2012 from an estimated USD 494 million in 2008.

The report, released at the NASSCOM Animation & Gaming Summit 2009 in Hyderabad, outlines the key challenges for the animation and vfx markets. Noteworthy among them are: ‘the limited demand for animation due to limited promotional budgets and restricted theatrical distribution, scarcity of long-term financing for animated films, competition from foreign animation and restricted use of vfx in Bollywood.’

Interestingly, the animation entertainment segment (which includes feature films, direct-to-DVD, advertising and TV) accounted only 22% of the total market in 2008; while vfx accounted for a mere 13% of the pie. As of today several animation films are in the pipeline for release next year. Biren Ghose, Chairman of NAGFO, who recently joined Paprikaas as General Manager, said, “Not many of the 15 or so animation films that have been announced will release next year.”

On a positive note, he said, “Visual effects (vfx) is an emerging market. About 8-12% of a movie’s budget is spent on vfx. Despite questions raised about the failure of vfx-heavy movies, it has to be noted that Aladin’s vfx budget was only 16% (10-20 crores) of the total cost. In other countries, box-office revenues are small chunk of total profit made by a feature, but in India box-office collection plays a major part in the revenues.”

He also added that animation industry should adapt to Bollywood’s example of having restructured to a higher profitability model, post recession.